Assignment 4: Saving and Investing

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Assignment 4: Saving and Investing

1.Describe a real or made up but realistic situation that could cause you or someone you know to have to use money from a financial reserve. My aunt lost her job last summer. They let her go because she would miss days off work without calling in. When her rent was due so, she had to use money from her financial reserve to pay the bill.

2. How many months' worth of expenses do you think your financial reserve should include? Describe at least two reasons for this decision. I think my financial reserve should include at least twelve months’ worth of expenses. One reason for this decision is that I may never know how much money that I might need if something is unexpected or goes wrong. The second thing is I just want to be prepared for whatever comes my way.

3.Would you rather have a savings account that offered simple interest, or an account that offered compound interest? Why? I would rather have a simple interest account. The reason why is it’s much easier to calculate and keep up w/ how much money you have. Also another reason is your money stays the same each year.

4. If you were opening a savings account with compound interest, would you prefer an account that offers annual compounding, quarterly compounding, or daily compounding? Why? I would prefer an account that offers quarterly compounding. The reason why is because I really don’t know that much about the other two. Another thing is that I’m a huge borrower, so this is best for me.

5. Which strategy for saving do you think would work best for you? Why? I think finding discounts on things is a better way for me to save. This is best for me because I don’t have a problem w/ buying cheap stuff or using coupons. Also it’s the only way I know save to save and budget my money.

6. Describe two financial goals that you would want to meet before you begin investing. Explain why you would want to reach those goals first. One of my financial goals that I would...
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